Philippines: Stopping illicit cigarettes

1 October 2017:

Building on the gains of government in fighting illegal cigarettes, the Department of Finance Secretary (DOF) instructed the Bureau of Internal Revenue (BIR) and Bureau of Customs to be vigilant of fake and smuggled cigarettes.

Tobacco products are slapped a uniform tax of P30 per pack, to increase next year by P31.2 per pack.

Government must protect its 2017 excise tax target of P173.19 billion, with tobacco tax alone amounting to P120.66 billion.

Tobacco products mounted the Top 10 list of most smuggled products in the country, equal to P10 billion plus in foregone revenues. Smugglers are dumping cheap, counterfeit cigarettes in Southern Mindanao, Western Visayas to Bacolod, Iloilo, and Cebu. Central Luzon has its share of fake and smuggled cigarettes. Fake cigarettes are available at the “University Belt” on Recto Avenue.

Smuggled cigarettes come from Thailand, China, Indonesia, Taiwan, Vietnam, and Malaysia. In Malaysia, the illicit trade is close to 60%, some of it probably reaching our shores.

The previous government launched an app empowering smart phones to track fake cigarettes via its tax stamps. The BIR app was initially effective but limited due to its erratic efficacy and the lack of broader access to the Internet.

We should be wary that after some fine police work, syndicates will improve their skills in smuggling and counterfeiting. Government should wise up and revisit its enforcement tools.

It might need to secure the help of our Asian neighbors, considering that the latest batch of smuggled cigarettes came from Thailand. The assistance of local tobacco players is needed to track smuggled and counterfeit products sneaking into the market.

The import of the marching order from the DOF chief is that aside from its adverse impact to state coffers, the public has the right to be protected from smuggled cigarette of questionable origin, content and intent.

Terrorism is linked with the trade of illicit drugs and cigarettes, lucrative tools to raise funds for their guns and bombs.

Plans to impose new taxes to fund the government’s “Build, Build, Build” infrastructure program will be for naught if smugglers will continue to ply their trade with impunity, denying the state of much-needed revenues.